Indian IT firms are sharpening their focus on the growing domestic retail sector and revenue projections suggest this is a good move. IT revenues from the retail segment were around Rs 1,100 crore in 2006, according to Springboard Research. The figure is expected to rise to over Rs 4,600 crore by 2010 — a compounded annual growth rate (CAGR) of 44 per cent.

Retail has been one of the largest growth sectors for all the top IT firms. For instance, Tata Consultancy Services (TCS), Infosys Technologies, Wipro Technologies and Satyam Computer Services saw their retail business grow by 33.6, 45.3, 38.5 and 117 per cent respectively on a year-on-year basis. The growth was much more faster than that in their BFSI segment.

This has prompted them to look at India too, and with much success. Rajesh Jain, executive director, KPMG, says: “It is still early days to comment on the size of the opportunity, but the deal sizes in this vertical are increasing and currently range between Rs 85 crore and Rs 860 crore.”

A case in point is that of Wipro Infotech. The company recently won a five-year outsourcing contract from Spencer Retail, an RPG group company. Early this year, it also bagged an outsourcing deal from Pantaloon worth over Rs 200 crore ($50 million).

“Indian retail players are focusing on quick expansion and larger footprint across the country. Hence they are looking for a partner who can take care of their IT requirements or be a part of expansion by taking care of IT infrastructure, applications and store rollouts. We are partnering with some of the retail players already and we are in talks with many more companies for similar rollouts,” says Anand Sankaran, chief executive, Wipro Infotech.

Prateek Pal, the head of retail practice, notes that TCS went with “live solutions” for outlets like Subhiksha, Birla and Madura Coats. The strategy is to propose enterprise resource planning (ERP) solutions for tier-I firms to begin with. This is followed by proposals for “total outsourcing of the IT infrastructure and mobility solutions”.

The need for embracing technology stems from the fact that the retail sector works on very thin margins. IT helps in keeping the tap of the supply and management. “Retail and consumer product goods (CPG) is an extremely dynamic and competitive industry, operating on razor-thin margins. The industry faces new business challenges everyday in the form of intense pricing competition, increasing margin pressures, shortening product life cycles and optimised customer spend across multi-channels,” explains Sidhartha Chowdhury, associate vice-president, HCL Technologies.

“Retail is a huge market opportunity for the Indian IT firms. But the real growth will come from organised retail, which is still a small percentage of the overall retail sector in India. The other aspect is that IT players will have to introduce customisation according to local requirements,” says Ravi Shekar Pandey, manager syndication research, Springboard Research.

Indian IT firms are launching customised solutions for the retail segment rather than giving them box solutions. Earlier this year, Wipro also launched The Intelligent NextGen Associate (TINA), a retail automation platform. TINA is a platform, on which customer interaction applications can be deployed that use speech, touch and motion. Not to be left behind, the second-largest IT firm, Infosys Technologies, launched ShoppingTrip360. The patent pending technology will help retailers to achieve visibility into in-store activity.

And it’s just not the top IT firms that are eyeing the retail segment. Firms providing niche services and products are also gearing up. Chennai-based Gemini Traze, a manufacturer of radio frequency identification (RFID) readers and antennas, is optimistic that the booming retail sector would fuel demand for its RFID tags. The company is optimistic that in the next 12 months the retail sector will contribute 15 per cent to its revenues.